tv Nightly Business Report PBS July 1, 2011 7:00pm-7:30pm PDT
>> tom: wall street wraps up a whale of a week, with the major averages rallying over 5%. will the buying continue? >> i'm bullish on the u.s. equity market. i'm looking for about a 10% return this year and next. people have forgotten you know, that up is normal. >> susie: and we'll see what's ahead for the economy, as we kick off the second half of the year. it's "nightly business report" for friday, july 1. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. american investors got an early start on fourth of july fireworks sparking a stock market rally. tom, investors were encouraged by a report showing u.s. manufacturing is still healthy even though the economy is weak. susie, the major stock averages posted strong gains for the fifth day in a row. the dow rose 168 points. the nasdaq added 42.5 and the s&p 500 was up 19. those numbers helped stocks post their biggest weekly gain since the bull market began more than two years ago. the dow was up 5.4%.
the nasdaq added over 6% on the week. and the s&p 500 tacked on 5.6% since last friday. >> susie: so far it looks like the second half of the year is off to a good start. darren gersh reports. >> reporter: just like the traffic heading for the beach, the economy in the second half of the year is expected to be slow, but steady. the markets will be satisfied with that, but not anyone else says economist robert brusca. >> what it hurts is the job market, what it hurts is the unemployment rate, what it hurts is that average american who is out of work and there's about 10% of us that are in that situation. >> reporter: most forecasters expect hiring to edge higher now that those headwinds we hear so much about are easing. gas is now 24 cents a gallon cheaper on average than it was on memorial day. and the supply shocks from the japanese earthquake are also fading.
by the numbers that means an economy that eked out 2% growth so far this year, could bounce back to 3% to 3.5% growth over the next six months. and don't worry too much about inflation. barclays capital expects the underlying inflation rate or core inflation to rise to just 2%. but barclays' dean maki says food and energy cost will bump overall price increases higher. >> we believe that overall inflation is going to stay above 3% this year. food and energy prices are rising at much faster pace than core prices and we think that will be a continuing trend. >> reporter: but will consumers unlock their wallets? that's a key question for the rest of the year. through may, real consumer spending grew just 1%. the hope here is that a firming in home prices, lower debt burdens and cheaper gas will encourage all of us to spend more over the summer and fall. but no one is expecting a dramatic change. >> we're in a moderate recovery
and what that means is that we are not going to have the booming recovery we have seen in the past. >> reporter: the risks to this outlook have been front page news for months. the greek debt crisis could flare up again. and leaders in washington might miscalculate, making a mistake on the debt limit that scares markets and tanks growth. and don't look for much help from the federal reserve for the rest of the year. after q.e.-1 and q.e.-2, we are now in the world of q-e none. >> so now we really are kind of on cruise control and we are hoping the private sector is up for it. we're hoping the abatement in these headwinds that the fed chairman talks about will be enough to allow the economy to move forward. >> reporter: so americans are likely to return from vacation to find an economy that is picking up speed, but not lighting up the sky. darren gersh, "nightly business report," washington. >> tom: here are the stories in tonight's n.b.r. newswheel: corn prices hit their lowest level since december, falling
almost 4% to just under $6 a bushel. the move came one day after the ag department said u.s. farmers planted one of their largest crops in decades. minnesota is closed for business. a state government shutdown began just after midnight when talks to close a $5 billion budget gap fell apart. with non-essential state workers on the sidelines, the state's park system closed ahead of the fourth of july holiday weekend. meanwhile, illinois governor pat quinn is canceling raises for 30,000 state workers. they won't get 2% raises they were promised, as the state copes with a budget crisis. the move will save illinois $75 million. still ahead, netflix. it's changing the way we watch t.v. and movies. but it's also seeing much more competition. >> susie: a stunning reversal in the case against former i.m.f. chief dominique strauss-kahn. he was freed without bail today and is no longer on house arrest
here in new york. prosecutors said they have serious problems with the sexual assault case against him. but as the manhattan district attorney pointed out, the investigation continues and charges against straus-kahn have not been dismissed. >> in this case as with every case, our office's commitment is to the truth and the facts and that will govern how we proceed. >> susie: for now, prosecutors are still holding strauss-kahn's passport and he will remain in the u.s. he's expected back in court in about two weeks.
>> susie: detroit's big three automakers registered double digit sales gain in june, but japan's top two carmakers are still struggling. sales popped 10% at the nation's biggest auto maker general motors. ford sales rose 13%, but chrysler was the big winner: up 30% thanks to a batch of new models, including the newly redesigned dodge durango and the fiat 500. toyota and honda both post sales declines of more than 20%. korean automakers gained ground: hyundai up 16%. kia 41%. cars.com senior editor joe wiesenfelder says their small cars are in demand. >> yes, i do believe that hyundai and kia are taking advantage of some of the shortages in supply from honda and toyota.
people that might have considered japanese might be willing to look at a korean manufacturer. generally speaking though, i think that hyundai and kia are doing well because they've been doing great work recently. they just keep adding more and more strong products. >> susie: while small, fuel efficient cars were top sellers last month, the recent drop in gas prices helped fuel an increase in truck and s.u.v. sales across the major brands. tom, a lot of demand for stocks today. this was one those days that almost everything was this the green, including the dow 30 component. >> tom: yes, rare to rise ahead of a holiday, long holiday weekend, susie, we usually see volume drop off and prices weaken. strong prices all this week including this friday. so let's get to it with our friday market focus. stocks put in another strong rally. the best in a week of rallies. lets' start with today's trading of the s&p 500. the first half hour of trading
was quiet, but just after 10:00 a.m. eastern time, prices shot up thanks to the strong manufacturing data. the past 90 sessions help show just how far the index has come this week. it is up more than 5.5% since last friday. the lows in march have held through to bouts of selling in june. all 30 stocks making up the dow jones industrial average are higher tonight than one week ago. caterpillar shares rallied more than 8.5% since last friday. american express jumped more than 8% and alcoa was up 7% in the past week. we mentioned kodak would be one to watch today and it was. volume more than tripled as
share fell more than 14%. but this fall did not take kodak to a new 52 week low. it would have to fall well below $2.80 per share for that to happen. the company received a mixed ruling on its patent fight with apple and research in motion. speaking of apple, after hitting their lowest price of the year last week, shares continue climbing, up another 2.25% today. a move over $3.50 would take them to their highest price since april. in all, the nortel patent portfolio went for $4.5 billion, three times what was expected. that helped fuel a rally in inter-digital. this company holds thousands of wireless communication patents. shares jumped 15% to a two month high. the consumer discretionary sector was the strongest overall today led by for profit education company apollo and darden restaurant. apollo added more than 6% after better than expected earnings.
darden is the company behind red lobster and the olive garden. shares jumped 6% on a solid outlook. fire engine and garbage truck maker oshkosh shot up almost 14%. activist investor carl icahn disclosed a 9.5% stake in the company. that helped other vehicle companies like engine maker cummins and truck maker navistar, each were up more than 3%. overseas, china's only legal gambling destination continues to rack up the wins. gambling revenues in macau, china were up 52% in june. u.s. firms with casinos there, wynn, las vegas sands and m.g.m. were up better than 3.5% each. while stocks found buyers, bonds fell to selling pressure, pushing bond yields up. this is the past 90 sessions of the interest rate on a ten year government note. it began the week below 3%. tonight it is 3.2% as bond
prices have fallen. we had to new stocks come to market this week. vacation rental website home- away rallied strong above its initial $27 per share price. first connecticut bankcorp priced at $10 and is above that tonight. and that's tonight's market focus. >> susie: zynga filed for its much anticipated initial public offering today. said it hopes to raise as much as a billion dollars when it goes public later this year. while we still don't know where zynga will trade or a ticker symbol, today's filing did offer the first look inside zynga's books. unlike many of its peers, zynga is profitable. it earned $90 million last year on almost $600 million in revenues.
>> tom: online video service hulu has been shopping itself around and google is interested. the "los angeles times" reports google is in preliminary talks to buy hulu. it also says hulu is meeting with others including microsoft and yahoo. the site is partly owned by nbc comcast, news corp and disney. it's expected to do half a billion dollars in sales this year. >> susie: one company watching hulu closely is netflix. they're arch-rivals. netflix is the nation's largest video rental subscription company, with nearly 24 million people renting d.v.d.s or streaming movies and t.v. shows from the california based company. but as silicon valley reporter
robin mcelhatton reports, netflix is still protecting its turf in the fast-growing video streaming market. >> reporter: netflix has been renting d.v.d.'s by mail for 12 years, but since it started streaming movies and t.v. shows over the internet four years ago, the company has taken off. it's stock has jumped more than a 1,000% in those four years. the latest quarterly earnings show income, revenue and subscribers are all up dramatically in the last year. netflix vice president steve swasey says the company will keep renting d.v.d.s in the u.s., but streaming is the future. >> the real growth of the company is streaming and as we launched a new market last year in canada and as we launch new markets later this year elsewhere in the world it will all be streaming. >> reporter: netflix is also aggressively expanding its content. it's inked dozens of deals with movie studios and television networks for new shows,
including original programming. >> but as netflix grows, so does the competition in the emerging video streaming market. >> google and youtube of course, we've been watching for awhile. they're acquiring a lot of cash right now, issuing bonds, one of the things they're expecting to be acquiring is content, perhaps a studio, maybe a network. something big so they have a lot of content to push through behind google tv. >> reporter: silicon valley tech analyst rob enderle says while everyone from hulu to amazon and apple challenge netflix on the delivery of content. it's the content producers like big tv networks and film studios that may ultimately be netflix' biggest challenge. >> their exposure is somebody going around them that has an awful lot of content-- a sony, an m.g.m., a warner brothers, going around them and going right directly to the user and effectively locking them out with lower prices which they can offer by taking away
netflix's percentage or other incentives that netflix couldn't match. >> reporter: netflix also faces other challenges. they may have to pay more to get the latest, most popular programming and then there are bandwidth issues. a recent survey shows netflix streaming accounts for 30% of all internet traffic during peak evening hours. the nation's broadband networks say all that streaming takes up a lot of space. some are passing the cost onto consumers. >> susie: robin mcelhatton's story continues on our website. there you can watch her interview with netflix vice president steve swasey. just click "video" at nbr on pbs.org. >> tom: here's what we're watching for next week: our friday market monitor guest is sandy lincoln, senior vice president and investment strategist at m&i investment management. we'll also see may factory orders and june chain store sales. and with a shortened trading week because of the july fourth
holiday, all eyes will be on friday's employment report for june. >> susie: president obama has nominated thomas curry to be comptroller of the currency. curry is currently a director of the federal deposit insurance corporation and heads an appeals committee within that agency. if confirmed, curry would replace john walsh, who's been acting director for almost a year. this is the latest move by the white house to fill key vacant jobs at financial regulators. >> tom: good news if you're hitting the road this independence day. gasoline prices are about 24 cents a gallon cheaper than memorial day. the national average now stands at $3.55-- the lowest price at the pump since march. still, that's about 80 cents higher than last summer. aaa expects gas prices to remain here for a while, based on falling oil prices and the release millions of gallons of oil from the strategic petroleum reserve.
john, nice to see you, welcome back again. >> thank you so much. >> tom: with all the worries out there and the soft patch talk, why such optimism for stock prices to rise? >> well, i think the first thing that investors have forgotten, because we've had 10 years of no net gain in the stock market, is that up is normal. with we have for the past 10 years with two severe bear markets is not normal. when you look at the problems we have today, they're real, we have difficult budget negotiations, greece has solvency issues. but we've come through many nasty recessions, we've come through world war two and vietnam and korea, and the cuban missile crisis, and the berlin blockade, and aids and sars and we always have problems and yet the market the past steven years has returned 11% including reininvestment dividends. so i think people have lost track of that. >> tom: in the long term yes the market is up of but we just went through a decade when the market hasn't returned hardly anything.
so are you saying playing the law of averages the next decade will be better if not the next six months? >> i am absolutely saying that. and only decades that have been down are the 1930's and the one we just went through, which was basically flat. so they varied a lot from decade to decade. but very unusual to have a down decade. >> tom: here's how you're setting yourself up for the next six month. you like basic materials, a mining here. but gold stocks as can you see clearly well off the highs from last fall. what's to bring this stock price higher? >> that is exactly what intrigued me, the disparity between what gold has done and what the miners have done. now you have sovereign well funds that niece physical gold or want it, you have etf's that have to buy physical gold to sat night the growing demand. and they've got to get it from somewhere and newmont is not only the largest u.s. gold miner but one of the cheapest
at about a dozen times earnings. >> tom: you like industrial metals, cliff resources makes pellets to fire off those global steel furnaces. share prices recovered nicely this week, closing this the mid 90s. still a buyer at this price level? >> well, we have our position, but i would be a buyer at this level, definitely, it's about nine time trading. i think that's pretty attractive. >> tom: you also like lkt, some call it a mutual fund in the form of a stock, the share price ralyed up until the spring, looks like a market performer, why do you think it could do better? >> you described it well when we were chatting before the show when you called it the poor man's berkshire hathaway. it a very diversified conglomerate. they're out of favor, one because they don't speak to the street, and the other reason is timber is their biggest division and home building is completely in the tank. so i like to buy things that are very cheap straw hats in
january. i don't know if it will be up before i'm on your show next time, but i feel good about it for the three-year pull. and i like to talk about that. >> tom: straw hats in january, that means hats and sarves in july. did you like johnson and johnson, another stock that has been out of favor until a couple months ago when it had a nice boost into the upper 60s. >> one reason i like j and j currently is they just reported their best quarter in, well, ever. 1.35. and this is a more defensive pick, and the past nine times i've been on your show i always pick one short. this time instead of a short i'm offering a defensive holding in j and j. >> tom: let's go to your picks on february 4, you liked intel, the chip giant, the share price is up by 4%, magnum international auto parts, down 5%. also powell stris off 2.5%. and do you still like any of
these? >> i was wrong about moody's, and we've covered it. i underestimated their strength. and we also sold powell. >> tom: disclosures? you own the others that we mentioned? >> yes, indeed. >> tom: that is john dorf man, our friday market monitor, happy 4th of july, john, he's with thunderstorm capital. >> susie: now that 2011 is at the half-way point, tonight's money file asks what happened to your new year's financial resolutions? here's karen gibbs, founder of the gibbs perspective. >> this fourth of july weekend is another chance to declare your financial independence. join the mass exodus from landlines and go totally cellular, saving as much as $50 a month. cut the cable cord and use the internet to stream your favorite programs and save hundreds of dollars per year. planning to buy firewood or clean your fireplace? do it now instead of the dead of winter when demand is high businesses offer discounts if you schedule services during their slow season.
next, don't pay for credit- monitoring service. the fair credit reporting act guarantees you a free annual credit report from each of the three nationwide credit reporting companies. starting this july get your annual credit report from experian, then in november from transunion and again in march from equifax and you've created a four-month monitoring service for free. finally, re-deploy resources and reap the rewards. christmas is 180 days away. saving the $2 you spend every day on a cup of coffee turns into $360 for holiday shopping. cutting back on cocktails at happy-hour could save you even more. financial independence is freedom. the freedom to say yes, the freedom to take a chance, freedom to do what you want. here's to your financial independence. i'm karen gibbs. >> susie: monday, the markets are closed in honor of independence day. our n.b.r. special edition looks
at dupont and its c.e.o. ellen kullman. she's recently been named one of the most powerful women in the country by both "fortune" and "forbes" magazines. we talk to kullman about her leadership style and how she's guided the fortune 500 company through the recession. we also look back at dupont's illustrious past and how it's evolving into a green company. join us monday for our special edition: "women in leadership: dupont c.e.o. ellen kullman." you know, tom, there are only 12 women c.e.o.s on the fortune 500, ellen kullman is one of them, she's sharp, strong and an interesting strong leader. >> tom: interesting how she's steered the company through the recession. before we go we want to make a special welcome. station to the n.b.r. family. viewers in central florida can now watch nightly business report weeknights at 6:30, on wucf tv.
i'm tom hudson. goodnight, everyone. enjoy your independence day weekend. you, too, susie. >> susie: you as well, tom. i'm susie gharib. have a safe fourth and we'll see all of you again next week. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org